Kinder Morgan to Increase Size of Trans Mountain Pipeline

Jan. 10 (Bloomberg) -- Kinder Morgan Energy Partners LP,
the biggest U.S. pipeline operator, will increase the size of
its planned Trans Mountain oil-pipeline expansion in Canada to
890,000 barrels a day to satisfy demand from producers.

The expanded project will cost C$5.4 billion ($5.5
billion), up from a most recent estimate of C$4.1 billion,
Houston-based Kinder Morgan said in a statement today. The
increase came after additional shippers signed long-term
contracts in a supplemental open-season round, according to the
statement.

Kinder Morgan announced plans in April to more than double
the line’s capacity to 850,000 barrels a day from 300,000, and
reduced the scope of the expansion in May to 750,000 barrels a
day, saying not enough shippers had signed up.

After Kinder Morgan decreased the size of the proposal,
shippers told Canada’s National Energy Board they were concerned
about their ability to “access the process” to sign up for the
pipeline, Kinder Morgan Canada President Ian Anderson said on a
conference call. The company held a third sign-up period for the
pipeline in December, Anderson said.

Thirteen customers have signed commitments to ship 708,000
barrels a day and about 180,000 barrels a day will remain open
for customers who want short-term, or “spot” access, Kinder
Morgan said said in an e-mail today. The project still must
receive federal approval.

Bigger Pipe

The larger project will require 36-inch (91-centimeter)
pipe instead of 30 inches, and will lead to more ship traffic at
the company’s Westridge dock in Vancouver Harbor, Anderson said.

The pipeline stretches 715 miles (1,150 kilometers) from
Alberta to Vancouver and is the only one connecting Canada’s
oil-sands region to the West Coast, according to the company.
Expanding it would allow more Canadian oil exports to Asia.

Other pipelines that would increase shipments as oil-sands
production expands, such as Enbridge Inc.’s Northern Gateway and
TransCanada Corp.’s Keystone XL, have faced delays because of
environmental opposition.

Trans Mountain may be able to open quicker than competing
routes since it involves building a second pipeline and using
existing right of way where possible, Anderson said. If
approved, the expanded Trans Mountain is may be operational in
2017, according to the statement.

Environmentalists and Canadian First Nations groups have
said they oppose Kinder’s plan because it may lead to oil spills
in Vancouver harbor.

Challenging Opposition

Kinder Morgan expects the most challenging opposition to
the pipeline expansion from local groups in Vancouver, one of
Canada’s busiest harbors. There are no plans to add additional
marine safety procedures, Anderson said.

Kinder Morgan has been watching Enbridge Inc.’s efforts to
build support for its Northern Gateway pipeline “with great
interest,” Anderson said. Demand from producers to get crude to
Asian markets is the most important factor driving demand for
such pipelines, he said.

The company has support from communities along the route
and is working with groups to address concerns about
environmental impacts, Anderson said. The pipeline, operating
since 1953, traverses Jasper National Park in the Canadian Rocky
Mountains as well as some of Canada’s most productive farmland
in the Fraser Valley east of Vancouver.

Canada exported C$68.3 billion worth of oil products in
2011, more than the nation’s other main products that include
vehicles, logs and metals, according to Statistics Canada, a
federal agency.

Prime Minister Stephen Harper has made increasing Canada’s
oil exports a national priority. The federal government passed
new rules last year to speed up and simplify environmental
reviews on projects like pipeline expansions.